Research: Companies Want Law Firms to Help Them Increase Revenue and Cut Costs

By Larry Bodine, Esq. of Glen Ellyn, IL. He is a business developer with 18 years experience who helps exclusively law firm attract and keep more clients. He can be reached at 630.942.0977 and www.ApolloBusinessDevelopment.com.

These are turbulent times for corporate clients, which are struggling with management changes, workforce voids caused by layoffs, worries about cost-reduction initiatives and keeping pace with competitors.

This creates an excellent opportunity for professional firms -- including law firms -- to capture their outsourced work by showing companies how to increase revenue growth, decrease operating expenses, and demonstrate their expertise in the client's line of business, according to a new 80-page survey report, "Consulting & Professional Services Firm Hiring by U.S. Middle-Market Companies."

"The ongoing makeover of the business models of many companies is a notable finding in this study," said the author of the report, Mark N. Clemente, Editorial Director of Clemente Communications in Glen Rock, NJ. "In the near-term, companies will be exploring all manner of corporate growth opportunities to transform themselves in an effort to either realize cost-reduction synergies or to support wholesale shifts in strategy. Legal, financial, and strategy experts will invariably be required for those companies pursuing mergers, corporate combinations, and other deal-based growth opportunities," he added.

Clemente is a consultant and author of five books and journal articles on marketing, business communication and corporate development. The research is an X-ray into the factors that cause corporate clients to hire law firms. The study surveyed executives at 250 middle-market companies in the manufacturing, financial services, technology, retail, healthcare, construction, pharmaceutical, chemical, transporation, telecommunications, consumer products, media, entertainment, travel and hospitality industries. It inquired into the hiring requirements for accounting, law, management consulting, information technology, marketing and corporate communications.

• Increase revenue growth was cited most frequently by respondents as an essential determining factor in retaining services firms -- nearly 55 percent of those surveyed indicated this as an imperative.

• More than 45 percent of respondents indicated that service providers would be retained to support [their] company's strategic diversification. This finding highlights a current trend that is also evidenced in other survey questions: that companies are focused on ways to strategically redefine themselves as markets dry up, and as traditional business models become outdated and are no longer viable engines of revenue generation.

• Decreasing operating expenses -- which 37 percent of the respondents indicated as a principal reason to hire external advisory firms - was the third most frequently cited variable.

How to get hired

Corporate clients are hiring law firms to fill the void created by layoffs.  Notably, the highest number of respondents -- 42.6% -- indicated that the most important reason they will hire external firms is to perform work previously done by in-house staff.

The most frequently cited positive characteristic of a services seller is that person's intimate understanding of key trends [and] developments [occurring] in [the hiring company's] industry: 54.9 percent of the respondents indicated this as the most important characteristic of effective salespersons.

This attribute was followed closely by two other factors which illustrate that the seller is qualified to engage in substantive discussions: 49.4 percent of the respondents feel it is important that sellers have knowledge of [them] and [their] professional background; another 45.1 percent consider the seller's demonstrated knowledge of [the hiring] company and its strategic imperatives an important characteristic," Clemente wrote.

"The need to have "good chemistry" with retained advisors will increase in importance as advisors are integrated more deeply into the fabric of the hiring organization and made to work closely with multiple levels of client staff. The broader issue of "cultural fit" between the client and consultant organizations will likely become more significant," according to the research.

Companies that plan to hire large, multi-office firms are looking for a breadth and range of capabilities, a multi-regional and multinational presence, top talent and an ability to advance the client's corporate growth objectives.

However, many companies are instead seeking small and regional law firms. For instance, see the article, "Pendulum Swings in Favor of Mid-size Law Firms"  These companies are looking for a higher level of client service and responsiveness, lower fees, agility and flexibility in service the client, proximity to the company's headquarters and functional or industry specialization.

Getting fired

Corporate clients decide to change law firms for many reasons -- ranging from a decision to seek lower fees, a change in corporate priorities, a decision to seek a firm with broader capabilities and a decision to move the legal work in-house, according to the study. However there are clear reasons that a business client will terminate a law firm. Respondents cited the following reasons:

• 57.4% - cost overruns
• 51.9% - delays in receiving deliverables
• 43.8% - poor quality of work
• 38.9% - a change in the client's corporate priorities or strategies
• 30.2% - a decision to hire a larger firm with more capabilities
• 26.5% - a decision to hire a smaller firm for lower fees
• 13% - a decision to hire a firm with a greater level of specialization

"Professional service providers can expect much greater scrutiny -- and lower levels of patience -- from their clients relative to performance issues. Services firms will need to be even more diligent in keeping their clients abreast of any emerging problem situations that can be considered an "unwanted surprise," according to the report.

"Services firms must remember that clients are retaining "people" (e.g., skilled professionals). Thus, the initial hiring decision is based, in large part, on good chemistry with the engagement team. Changing the members of the team -- without the client's advance knowledge, cooperation, or consent - can disrupt continuity. This will force the client to get used to new working relationships in midstream ... a decidedly undesirable scenario according to many survey respondents."

The LawMarketing Portal has obtained a $100 discount off the purchase price of the study especially for our readers. Simply visit http://www.clementeonline.com/research_reports.html for further information and how to order your own copy of the report, which has an official price of $495.  LawMarketing Portal readers can buy the report for $395 -- and save $100 -- by using the code LMP2009 when ordering the report.

Key areas of analysis include:

• Why professional services buyers are buying … detailed information on the strategic challenges and market forces driving companies’ need to hire consultants and other professional service providers.
• In what areas buyers are earmarking funds for advisory services support … now and in the near-term.
• The service capabilities and technical skills companies are seeking today … in comparison to past requirements.
• Why corporate purchasers are firing – or redeploying – their existing service providers.
• The skills and traits of professional service sellers that buyers deem important.
• The sales-related information buyers want to see – in written proposals and in-person sales presentations – to make their hiring decisions.
• More than 25 in-depth areas of investigation.